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The three levels of value creation in client relationships

“If you don’t like change, you’re going to like irrelevance even less.” General Eric Shinseki, Chief of Staff, U. S. Army

The primary function of a business is to create value and I would imagine that everyone would agree that it is vitally important that our clients experience the highest value possible from what we can do for them.

The degree of value experienced by the client will ultimately determine how much business they give you, how long they remain a client, the level of fees they are willing to pay and how many high-quality referrals you receive.

One of the important things to realise about value is that it is a perception, meaning that it only ever takes place and exists within the mind of the client and nowhere else.

Why is this important?

It seems important to me because by understanding the psychological nature of value creation it becomes both possible and relatively easy to make the work you do with your client more meaningful and, therefore, more valuable.

Several years ago I learned a distinction from the coaching world that enabled me to leverage what I was doing and resulted in a significant increase in my fee level and ensured that I got good referrals from almost every single client. I have shared it with many of my adviser clients because it is equally applicable to them too.

Imagine that there are three levels of value that a client could experience.

1. Product and supplier

2. Complex problem solving

3. Transformational change

With the first, product and supplier, the client is seen as having a need, want or desire for a product. For example, a savings plan, a pension or an investment. An adviser can fulfil this requirement, do a great job and then it is done. The client can be perfectly satisfied with the work and the value for them is that they are not thinking about the situation anymore and, therefore, are free to think about something else.

With the second level, complex problem solving, the client has a more vexing problem. It may be something that is not so easily solved, perhaps involving several people, a business or having significant implications. For instance, it could be an inheritance issue that involves several family members and a sizeable estate. The adviser has to have a high skill level and ability to solve the problem because of the complexity. Once the problem is fixed, or at least in hand, the value for the client is in the relief of taking action and having the problem solved.

The third level of value, transformational change, takes things to a different level. This is where the work that the adviser does with the client has a significant and lasting impact upon the client’s quality of life both now and in the future. The client experiences a measurable and meaningful shift in how they think and behave.

An example might be where the adviser puts a great deal into really understanding how the client wants to live their life, what really matters to them and this helps the client gain more clarity. The subsequent recommendations, advice and planning feeds directly into this and, as a result, the client becomes more aligned with how they want to live their life and, ultimately, who they really are. Level 3 encompasses the arrangement of products and quite possibly complex problem solving too, but these are not the primary aim of the adviser.

Should advisers operate at level 3?

First and foremost it has to make sense to you to do so, otherwise nothing will change. However, in this respect it is useful to consider that level 1 has, from an adviser’s perspective, been dying a slow death for years. This is the level most at threat from technology. Providers are cutting costs, including what they pay advisers. Opportunities for purely product-centred advisers will continue to diminish. As a result of these and other reasons, many advisers have moved, and will continue to move to a level 2 business model, therefore creating more competition at this level.

At level 3 there is no competition. People who become proficient and confident in doing transformational work will always be in demand. In the coaching world, coaches who create genuine transformation are the most sought after and successful. From what I can see it is the same for financial advisers – the ones who clearly connect money and life and help clients get more of the life they want are the most in demand and also the least at threat from external factors.

How do you evolve to level 3?

The change is not, first and foremost, a behavioural one. Trying to change at this level rarely lasts because behaviour is the result of state of mind. When people genuinely change, and the change lasts, it is because they have experienced a shift in their thinking first. I wrote about this extensively in my book ‘The Client-centred financial adviser’.

The shift involves seeing the bigger picture and understanding that value creation is ultimately about how a client feels and, therefore, the act of value creation begins by emotionally engaging a client about what really matters to them.

This is not a new idea. In 1951 one of the most successful life insurance salesman of the time, Frank Bettger, wrote what became a famous book called ‘How I raised myself from failure to success in selling’. Chapter 5 is called ‘How I learned the most important secret of salesmanship’. What was this secret? Finding out what people want, and helping them get it.

How many people do you think have financial products on their bucket list? No one actually wants a pension, investment or inheritance tax solution. It is only certain elements of the financial services business that continues to think this. Products and solving complex problems are only part of the means to the end, not the end itself.